While Ottawa debates affordability , defence spending and investment incentives, millions of Canadians are struggling with

stagnant wages , weak unemployment benefits and growing economic insecurity, which is a disconnect economist Lars Osberg says is having serious social consequences.

“The big missing link is that we don’t have much of a social safety net in Canada,” the Dalhousie University economics professor said. “We haven’t had it for quite a while and we’re facing an enormous amount of

economic insecurity and a long period of stagnant real wages.” Osberg said the past year has been a roller-coaster, with uncertainty around jobs , trade and government policy. Some Canadians may have profited from this instability through investments, real estate gains or business opportunities arising from market volatility, but many households are under intense financial pressure, a reality masked by political talk of “affordability” that fails to address deeper structural problems, he said.

At the heart of the issue, he said, is Canada’s eroded social safety net, particularly

employment insurance (EI), which, along with other social programs, isn’t keeping up with today’s economy.

EI benefits have mostly stayed the same in value and replace roughly 55 per cent of a person’s wages. The benefits are higher than in the United States, but they lag far behind European countries such as Denmark, where they replace 90 per cent of a person’s wages, the Netherlands (70 per cent) and Sweden (80 per cent).

Osberg said more people are working temporary or gig jobs, unemployment is higher than it used to be and new technologies such as artificial intelligence are changing what kinds of jobs are available. As a result, he said the system needs to be updated so people are protected when their work changes or disappears.

More than 870,000 Canadians reported gig work as their main job in late 2022, and temporary and part‑time workers report far higher job insecurity than permanent workers, according to Statistics Canada data.

But Ottawa isn’t treating the public’s concern about economic insecurity and the weak social safety net as priorities, Osberg said.

“People are not seeing their problems recognized in Ottawa,” he said. “A lot of people feel insecure and pressed financially, and the federal government just doesn’t seem to want to confront this in a meaningful way.”

Canada’s unemployment rate has been higher and more volatile in 2025 compared with 2023 and 2024. The rate dipped to about 6.5 per cent late this year, suggesting some easing in the labour market, but year-over-year joblessness generally increased.

Rising living costs are also adding pressure, with 67 per cent of Canadians saying the cost of living is worse than ever, according to Abacus Data research released in December. In November, food prices climbed 4.7 per cent year over year, the fastest pace in two years, and families can expect to pay roughly $1,000 more for food next year, according to Canada’s Food Price Report 2026.

“This is not a marginal concern or a background anxiety,” David Coletto, chief executive of Abacus Data, said. “It is a dominant lived experience that continues to shape how Canadians interpret government performance, leadership and competing policy priorities.”

Osberg is critical of some federal priorities, particularly the government’s massive increase in defence spending, which is planned to rise to five per cent of gross domestic product (GDP) by 2035, from about 1.4 per cent today.

The federal budget earmarked roughly $63 billion over five years for military equipment, personnel and infrastructure, and about $280 billion in broader capital projects for infrastructure, innovation and industrial development.

The budget did include a modest tax cut for middle‑class Canadians and introduced automatic tax filing for low‑income households, making it easier for millions to receive benefits such as the GST/HST credit and Canada Child Benefit in 2026.

But Osberg said support for everyday Canadians remains limited.

“If you have a government focused on increasing defence spending to five per cent of GDP, and on big projects that are very capital-intensive, but don’t create many jobs, then you’ve got a government that isn’t paying attention to the uncertainties and anxieties dominating the lives of a lot of Canadians,” he said.

Osberg said prolonged economic insecurity can have serious social and political consequences, including rising anger, polarization and openness to extremist or exclusionary politics, which are trends already unfolding in other countries, particularly the U.S.

He said the most urgent issue in 2026 will be the growing sense of insecurity felt by working Canadians. His prescription is clear: strengthen employment insurance and rebuild the social safety net.

“It’s absolutely possible to walk and chew gum at the same time,” Osberg said. “You can build pipelines and invest in big projects while still having a strong insurance system for people who lose their jobs.”

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